Jump to content
Invision Community

The pros and cons of using your local bank

Recommended Posts

The pros and cons of using your local bank

According to a 2018 Bankrate and Money survey, the average U.S. adult has used the same bank account for 16 years. If you fall into that category, you’ve most likely been with your local bank since you opened your first checking account at age 13. They gave you your first auto loan when you barely had any credit history, and you may have even went to them for your first mortgage. Why wouldn’t you want to keep your savings with a bank that has played such a constant role in your life?

The answer is simple — opportunity cost. The average brick-and-mortar bank is paying .01 percent APY on their savings accounts this year. Some of the country’s biggest banks pay even less than that. When you park your money in a bank account that’s not offering enough interest to keep up with inflation, it’s important to think long and hard about what you’re giving up.

Imagine you have $10,000 saved and the ability to let it sit in an account for five years. If you earned .01 percent on your savings during that time and interest compounded monthly, you would earn a whole $5 over five years for a grand total of $10,005 in the end.

If you earned 2.25 percent on your savings, on the other hand, you would end the five-year period with $11,189.54 in the bank. That’s a big difference, especially since there’s no additional effort on your part.

Another downside of using a savings account from a traditional bank is the fact that most aren’t free of fees — or they make it difficult to avoid them. With a Chase savings account, for example, you must keep a minimum amount on deposit, set up repeating transfers or link to one of their premier checking accounts to avoid the $5 monthly account management fee.

Your local bank may also offer additional products and loans you need access to such as home equity loans, auto loans, personal loans and mortgages, but you’ll never know how competitive they are unless you shop around. Typically speaking though, loans from traditional banks come with higher fees and higher rates over all.

Of course, there are upsides to using a traditional bank — and especially one you’ve known and trusted your whole life. For example, you may know your banker and have a personal relationship with people who work in your local branch. You can also stop by your bank to ask questions and speak with a person who can access your account, which makes traditional banking infinitely more personal than online banking. Some consumers enjoy the familiarity of banking with people they know, and it’s hard to blame them for that.

If you have money to deposit or withdraw, you can also swing by your local branch and complete the transaction in person. Most big banks also have broad ATM networks customers can access in the local area and other parts of the country.

Here’s a breakdown of pros and cons:

Pros of brick-and-mortar banks:

  • You can stop by in person to ask questions
  • Convenience and a personal experience
  • You may have access to a broad ATM network

Cons of brick-and-mortar banks:

  • Fees and interest rates may not be competitive
  • Most big banks pay almost nothing on their savings accounts


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Create New...